Method fixed ctopov


To test the conjecture, a special program that allows you to carry out pilot studies. The program is designed so that when working with the quotations of famous historical figures, and the changes in prices in the next few days is terra incognita. We used historical data daily quotations of shares traded on the NASDAQ in 4.5 years (02.01.97-28.06.01). Stock selection is arbitrary. The only requirement - a daily trading volume of at least 1 million a day. All the experiments were used: the original deposit - $ 50,000, the limitation of losses - 50% of the bill, the package price of one share - $ 2000.

Trade is conducted in parallel with 16 highly liquid stocks. Given the premise that the next price movement is impossible to predict, we performed an experiment in which the direction of the opening position is chosen randomly (random number generator - a uniform distribution). Commission - is missing.

The ratio of stop-loss: stop-profit - 1:4.

The method of setting stop-loss - a fixed amount, $.

The choice of stop-loss based on the following considerations emanating from the package price of one share.

With the cost of the shares at $ 10, we do not buy more than 200 shares. In this case the value of stop-loss, which is equal to $ 100, means a change in the stock price by 0.5 points. With stop-loss, equal to $ 400, - 2 points. If the stock price is $ 50, the package will contain 40 shares. Stop-loss of $ 100 means a change in the stock price by 2.5 points, with $ 400 - 10 points. Maximum theoretical value of stop-loss, equal to $ 2 thousand, means that stock price dropped to 0.

Calculations for each experiment was conducted 50 times the computation of the standard deviation. The results are shown in the table.

As is clear from the data, despite the random selection of the direction of opening positions, the method can produce a positive result if the rules for risk management (see Table. Stop-loss $ 300). In this connection there is the issue of optimization in terms of trade. Is the most appropriate choice of study:

- Stop-loss and its relationship with the stop-profit,

- The direction of open positions.

The simplest way to determine the stop-loss is a fixed amount of the loss that may be incurred by the investor in a single transaction or a percentage of the initial value of the package share. Stop-loss should be in some optimal interval, because if its value is very small, it significantly increases the risk of tripping - the investor will continue to lose money for its payment and brokerage commissions. High values of stop-loss leads to fix the profit of at work on the proposed method due to the need for even higher values stop-profit.

The experiment found that the best results are the values of stop-loss and its relationship with the stop-profit is in the range 3-7, and the most stable - in the range 3-4.

The higher the value of stop-loss and this ratio, the lower the number of triggered stop-loss and stop-profit. And this is very important. Who do we feed? According to established practice, brokerage commissions can be in two forms: a fixed amount for interest and for the amount of the share. These costs can not affect the outcome of trade. While we have a positive result in the commission-free trading, triggered stop loss when using a fixed quantity Commission and a loss on payment of commission per share. Frequent attempts to enter the market - a dangerous practice for the investor. In this case, the results are the worst.

If you look at the ratio of triggered stop-loss and stopprofit depending on the stop-loss with brokerage commissions and without them, it becomes obvious that the generation of profitable trades for the investor. Having a positive result in no commission, we lose half of capital at work with a fixed quantity Commission and suffer a loss on payment of commission per share. In this situation, profits can only be a broker or a company engaged in proprietary trading.

Despite the statistically significant positive results, it is impossible to ignore the classical theory of price trend based on the fact that the price moves in one direction. And the current trend is more likely to last than change direction until it loosens. Therefore of great interest in the study of trading with the trend of price changes.

Trend movement will assume closing price change in either direction at least 3-10% for 3-30 trading days. In the experiment, all positions are open only in the direction of the trend.

Using the trend improves the results obtained by applying the method of trade. Advantages serious - is reducing the number of triggered stop-loss and elimination of chance. Thus, the results obtained on randomly selected blocks of shares, showed the ability to have a positive impact when using this method. The value of the commission payable to the broker for the transaction, can have a serious impact on the final result. Therefore, this method is only available trade finance organizations with high initial capital and entitled to a lower commission (not exceeding $ 0.002-0.02 per share).

However, with the introduction of a number of additional restrictions probability trading method can significantly improve the results of trading. Of these limitations - in the following publications.